An attorney for FTX has revealed that SBF ordered the company's co-founder to open a secret line of credit for Alameda Research for $65 billion.
The bombshell statement has been dropped (1) by the attorney representing FTX, Andrew Dietderich, who claims that Sam Bankman-Fried directed the company's co-founder, Gary Wang, to establish a line of credit for Alameda Research.
Alameda Research, the crypto firm owned by the exchange, was at the epicenter of the devastating crash recently. Due to a "liquidity crunch," the incident caused FTX and Alameda Research, along with around 130 of their subsidiaries, to file for bankruptcy in the United States.
The attorney apparently disclosed the information on January 11th, at a hearing in a bankruptcy court in the state of Delaware, as reported by the New York Post.
According to Dietderich's explanation, the former head of FTX urged Wang to establish a "secret backdoor line of credit" for Alameda Research for $65 billion.
He went on to say that the objective of the backdoor was to devise a system that would make it possible for Alameda Research to borrow the money from FTX sans having first to obtain the approval of the users of the exchange.
How the Backdoor Was Created?
Mr. Wang made this backdoor by putting a single integer into lakhs of lines of software for the exchanges. This created a credit line from FTX to Alameda, which clients were unaware of or agreed to. We know the total amount that can be drawn from that credit line, and it was sixty-five billion dollars."
Reuters mentioned earlier that SBF had moved $10 billion from Alameda to FTX in November. According to the story, the former CEO shifted an additional $2 billion, which cannot be accounted for now.
Bankman-Fried has refuted the accusation that he stole FTX funds, which was made against him in a "pre-mortem overview" published on January 12th. In his statement, he stated that FTX International had become illiquid in the same manner that Alameda had.
According to the explanation provided by SBF, "Alameda had a buffer spot open on FTX, as well as the run on the bank converted lack of liquidity into insolvency."
Wang Has Plead Guilty
The testimony provided by the FTX lawyer lends credibility to the claims made by the CFTC. SBF, Wang, & Alameda CRO Caroline Ellison were all named as defendants in criminal allegations that the government brought in December. The CFTC asserted that the co-founder of FTX had established a "virtually unlimited" covert line of credit for Alameda.
In the meantime, the former chief executive officer of Alameda Research and Wang have entered guilty pleas to the accusations brought against them concerning the sudden collapse of FTX.
In contrast, SBF has entered a not-guilty plea to all allegations against him, and the beginning of his trial is set for October. Following his release on bond for $250 million, he is currently subject to home confinement at his parent's residence.
According to the current CEO of FTX, John Ray, Sam Fried's parents, Joseph and Barbara Fried are currently the subject of an inquiry. Ray divulged the fact that the corporation paid Bankman cash for providing "legal advice" to Ray's son.